Netanyahu faces an historic opportunity to reform the economy by breaking the concentration of economic – and political – power in the hands of less than 20 families.

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Israeli governments are notorious for their inability to decide or to execute
decisions (over 70 percent of government decisions never get implemented). This
may be positive, since in some of those decisions, the government actually does
more harm than good but not always.

Remember the brave moves to cut
bloated government expenditures, as well as the financial market reforms made by
then finance minister Binyamin Netanyahu.

Those decisions, however
imperfectly executed, saved the Israeli economy in 2005 from an Argentina-like
collapse.

But famous media pundits argue that these financial reforms,
known as the Bachar reforms were actually a catastrophe. The facts speak for
themselves. Not only have they saved Israel and its banks from near economic
collapse, they put the Israeli economy, after two decades of snail-like growth
and frequent recessions, on an amazing path of an average growth of five percent
annually.

But even the dramatic increase in the size of assets held by
the Israeli public, of 60%, from NIS 1.2 trillion before the reform to NIS 2.2
trillion at present, despite a terrible world financial crisis, does not deter
our famous commentators from calling the reforms “a catastrophe.”

ONCE
AGAIN, Netanyahu is facing an historic opportunity to reform the economy by
breaking the inordinate concentration of economic – and political – power in the
hands of less than 20 families.

They control the huge pyramid-style
corporations that dominate the Israeli economy, representing about half the
value of Israel’s traded assets! Such a great concentration enables these
corporations to wield monopolic power, and choke competition and the efficiency
generated by it. Low efficiency is a major factor in the low productivity of the
Israeli worker – about half that of the American worker – and of his low
earning.

Monopolies inflate prices and exact a heavy “monopoly rent” on
everything we consume, estimated at about a third of what the average Israeli
earns. The low earning strata that devote most of their income to consumption
suffer most. It is a major reason why so many working Israelis are
poor.

Excessive concentration also endangers the total economy. It is at
the heart of the serious problem Israel has: the problematic close relationships
between big business, politicians, bureaucrats and the media, which is mostly
controlled by our oligarchs. It corrupts both politics and the
economy.

The Bank of Israel’s annual 2009 report on the economy
(published April 2010) included a pioneering study that established the fact
that Israel indeed suffers from excessive concentration and warned about its
grave dangers. The study provoked a storm of protests and counter-arguments by
the servants of our oligarchy. There were several biased efforts to discredit
it.

Netanyahu picked up the issue and publicly expressed his
determination to address this severe problem several times. That he did this at
a time when he is besieged by existential issues, such as the threat from Iran
and by unusual coalition woes is evidence that he understands the great
importance of this challenge. He did not flinch even after some economic pundits
who habitually serve the interests of the oligarchs attacked him ferociously,
charging that he had more important issues to address, like poverty and the
miserable economic lot of the Orthodox and of Arabs, as if they do not realize
that poverty is in large part as result of the monopolies’s exploitation.

They
even tried to deflect attention to the secondary issue of inflated executive pay
common in publicly held companies, again hiding the fact that such salaries are
also a function of excessive concentration and of the fact that it pays the
oligarchs to pay their executives, mostly former government employees huge sums
because the are not just executive but mostly machers (operators) who know how
to milk billions from the government, so that they earn every shekel of their
inflated cost.

THE PRIME Minister’s Office has been preparing to appoint
a commission charged with framing the terms of the implementation of this
reform. It will include representative of the Treasury and of The Bank of
Israel.

But months have elapsed and the commission has not been formed
yet. It is said that, as usual, turf and political prestige infighting is
holding this historic reform back.

Some even claim that these struggles
are fomented by powerful lobbyists and their partners in the bureaucracy who are
looking for every way to kill the reform, postpone it or vitiate its
powers.

It is hard to believe that a reform launched by the two highest
office holders in Israel in the sphere of economics, the prime minister and the
governor of The Bank of Israel – a reform explicitly supported by
Prof.Yuval Steinitz, who has mastered economic knowledge in an amazingly
short time – will be undermined by the oligarchs and their henchmen. But this
has happened before, and we’d better be worried.

The reformers must know
the immense importance of its success both for Israel and for their careers, and
what damage they will incur if it fails.

Reason demands that they do all
they can to get it going soon. But reason does not always dictate developments
in Israeli politics. Let us hope this time it does.

The writer is
director of the Israel Center for Social and Economic Progress.

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